Abstract

Motivated by recent debates on the possible role of wages as an income policy tool,
in this study we examine the dynamic inter-relationship between wages in Bulgaria,
mainly in the context of its EU accession. Relative to the WDN studies on the other
EU member states, the novelty in this paper is the inclusion of the minimum wage
as a possible conditional determinant of the other two wages. We demonstrate
that minimum wage increases do not cause changes in average wages in either
the government or the private sector. Using variety of econometric tests, we also
demonstrate the leadership of private sector wage over public compensation and
recommend the implementation of policy measures aimed at labor productivity
growth.